Not Cheap or Cheerful: South China’s New Paradigm
With the cost of raw materials rising along with labor costs, foreign companies are starting to move their manufacturing bases out of China, AP reports. After the Lunar New Year holiday this year, 30-40% of workers didn’t return from their villages to their factory jobs in the Pearl River Delta:
Companies were already under pressure from rising raw material costs, restive workers and lower payments for exports because of a stronger Chinese currency. Despite hiking wages, labor shortages kept getting worse as workers increasingly spurned the often repetitive and unskilled jobs that helped earn China its reputation as the world’s low-cost factory floor.
[...] Later this year, these jobs will be gone as Guangzhou Fortunique’s American owner, Charles Hubbs, moves a large chunk of production to Southeast Asia.
“I don’t know of any factory in China that can absorb both the raw material prices we have, the labor issues we’ve been looking at and the renminbi,” China’s strengthening currency, said Hubbs. The currency is also known as the yuan.
He’s joining a wave of export manufacturers, big and small, that are moving from China’s coastal manufacturing regions to cheaper inland provinces or out of the country altogether, in a clear sign that southern China’s days as a low-cost manufacturing powerhouse are numbered.